An untold number of businesses could request extensions to file withholding statements; tax refunds could be delayed for thousands of workers

By JOSE L. CARMONA

Glitches in the local Treasury Departments (Hacienda) Withholding Statements or Informative Returns software have forced an undetermined number of businesses to request an extension to file and deliver their employees W-2 (withholding statement) forms after the Jan. 31 deadline.

As a result, an untold number of wage earners, possibly thousands, who are expecting tax refunds will receive their W-2s and therefore file their tax returns later than usual this year.

The delay will put them at a disadvantage with other taxpayers that are able to file promptly. That means taxpayers who dont receive their W-2s by Jan. 31 will have to be extra patient as they wait for their tax refunds.

Normally, Hacienda holds a reserve from which refunds are paid to early filers. Once the reserve is gone, however, taxpayers must wait until after April 15, when the agency receives the bulk of the income tax payments.

According to sources, the snafu stems from Haciendas poor implementation of its own initiative to replace paper W-2s with electronic filing for all businesses with 15 or more employees.

In October 2002, Hacienda informed all businesses having to file between 15 and 250 tax-withholding forms that they would be required to submit all information pertaining to payroll retention electronically--whether through the Internet or through some magnetic medium such as floppy disk, CD-ROM, or cartridge. Businesses could download the appropriate software from Haciendas website (www.hacienda.gobierno.pr) or obtain the program on disk, free of charge, at Hacienda.

Businesses with 250 or more employees must purchase their own special software in order to file their withholding statements, as Haciendas program only allows for up to 250 forms. When businesses attempted to use Haciendas software, many found it wouldnt run or would do so but with many glitches. The result has been a veritable disaster, according to sources.

"I have never seen anything like this. It has been a mess," said one source. "For days we had to put our computer person to do nothing but sort out this problem. Thank God we did. Imagine how many small businesses there are that dont have an in-house computer person. For that matter, there are a lot of businesses with more than 15 employees that dont even have their payroll system computerized." Like others interviewed for this story, the source requested anonymity for fear of reprisals from Hacienda.

In fact, the foul-up has spun a cottage industry, with several information technology firms placing ads in the dailies offering their services to straighten out the mess.

In view of the difficulties, Hacienda notified businesses early this month that they could request an extension beyond Jan. 31. The request can even be made via Haciendas website.

"It isnt unusual to have glitches when implementing a new program, and thats probably why Hacienda is extending the filing deadline, since it didnt have any other alternative at hand," Juan Jose Santiago, president of the Puerto Rico State Society of Certified Public Accountants, toldCARIBBEAN BUSINESS. "I dont recall Hacienda ever giving an extension on W-2 filings. This is a first."

As of press time Monday, Hacienda press officials had said 50 businesses had already requested extensions. They couldnt indicate, however, how many more are expected to do so before weeks end or whether affected taxpayers would be allowed to file their tax returns after the April 15 deadline.

This Caribbean Business article appears courtesy of Casiano Communications.
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